IRS offers every business owner a number of tax deductions for small business if you are knowledgeable on where to look for them. Below are the tax deductions that small business owners should know:
Education Deductions
IRS has strict guidelines when deducting educational expenses, so make sure to read the Publication 970 thoroughly. The employers may deduct employee educational expenses once the courses improve or maintain job-related skills or if the employees require education to continue with their current work.
Deductions on Start-Up Cost
You may deduct up to $5,000 in your startup. The expenses that aren’t deducted may be amortized over a 6-month period that starts once you open your business. You may amortize or write off advertising, market research, business-related travel, employee training, advertising, legal advising, and some costs.
Vehicle Deductions
Car deductions are delineated clearly under the rules of IRS and tend to be among more scrutinized items, so record-keeping is important.
Entertainment Deductions
IRS does not mind your mixing business with pleasure. You may deduct up to fifty percent of the entertainment expenses for the unreimbursed business meetings. Entertainment should be in a business setting or must follow or precede a business meeting.
Equipment Deductions
A small business may take a deduction of up to $108,000 for the equipment bought in year 2006. This deduction basically falls under the Section 179 of tax code and reduced if purchases of equipment exceeded $430,000.
Software Deductions
Normally, software should be written off over 3 years for the reason that it’ll serve your business more than a year. However, Section 179 enables small businesses to deduct software that’s off-the-shelf the year it’s purchased.
Travel Deductions
The unreimbursed travel expenses are actually tax-deductible. IRS recommends keeping a log of receipts and expenses. Lodging, transportation, and even dry cleaning may be deducted and half of business meals. You may also deduct the expenses for the business associates who are traveling with you.
Professional and Legal Fee Deductions
Attorney and accountant fees are deductible as business expenses, yet you can’t deduct the professional fees for buying business assets like equipment. Such charges are included as the cost of the purchase. The sole proprietors may write off some fees from the tax professionals on Schedule C-EZ or Schedule C. For the sole proprietors, additional expenses may be deducted on f your 1040 in Schedule A.
Advertising Deductions
Promotions and advertising related to your business directly are deductible as miscellaneous expenses.
Charitable Deductions
Limited liability companies, S corporations, and partnerships all require that every member files the taxes of the company on their personal forms like charitable donations. The donations are actually passed through members like the income of the organization. C corporations are also entitled to the corporate deductions.
If your small business makes non-cash donation like giving a computer or a car, determine how much you could deduct. The deduction would reduce if you have received tax break for donated properties or if it lost a significant value.